Stocks gained to end at records on Wednesday, closing out a choppy session higher after the Federal Open Market Committee's June meeting minutes signaled a split on the timing for rolling back crisis-era monetary policies.
The S&P 500 and Nasdaq ticked up to reach record intraday and closing highs, led by a resurgence in growth and technology names. The Dow also rose.
Meanwhile, shares of Didi Global (DIDI) added to losses after shares sank 19% on Tuesday to close below their IPO price from last week, after Chinese regulators called for the removal of the ride-hailing service in app stores in the country. Treasury yields dropped along the long end of the curve, and the 10-year yield dipped to hover near 1.3%, or the lowest level since February.
U.S. crude oil prices also sank, falling after reaching a six-and-a-half year high just earlier this week after OPEC failed to come to a deal to increase crude output. Some pundits speculated that some oil producers might begin to act alone to increase output after the breakdown in OPEC talks. Others, however, were more skeptical.
"This has been a long-time coming. [There's been] a lot of destruction in the energy patch here in the United States for the past three, four years. The pandemic kind of finished the job for most U.S. producers. OPEC really was in the driver's seat for most of this year," Dan Dicker, the Energy Word Founder, told Yahoo Finance. "With this country coming out of the pandemic so strongly and the rest of Europe and the rest of the world still to come out of the pandemic leads many traders to believe — and me to believe — we’re not done with the rally in crude oil."
For equity investors, focus has centered on both the path forward for monetary policy – which has underpinned stocks' record rebound during the pandemic – and the pace of growth in corporate earnings. The Fed's June meeting minutes released Wednesday helped elucidate the central bank's thinking around when to tighten their currently ultra-accommodative monetary policies, from their crisis-era asset purchase program to near-zero benchmark interest rates. According to the minutes, "a few participants mentioned that they expected the economic conditions set out in the Committee's forward guidance for the federal funds rate to be met somewhat earlier than they had projected in March."
And next week, second-quarter corporate earnings results will kick off in earnest, showing the extent of the boost companies received following a major U.S. vaccination campaign and widespread reopenings.
"The second half, honestly it's shaping up to be a continuation of what we've been seeing, but maybe a little moderation in these growth rates. If you look at earnings expectations for this quarter coming up, they're up about 60% year-over-year – earnings expectations have been absolutely soaring," Michael Antonelli, Baird PWM market strategist, told Yahoo Finance. "That rate will probably come down, but we can't be disappointed with that level of growth expectations and earnings. Forward PEs [price-earnings ratios] are still pretty high above 21. But I think honestly the second half is shaping up to be a continued reopening, continued expectations for better earnings, and a possible correction."
"If you were to take any single year in history, you should expect about three 5% corrections and one 10% correction," he added. “We’ve had one 4% pullback. So, to me, the probability of another pullback … is high.”
4:05 p.m. ET: S&P 500, Nasdaq eke out record highs after Fed minutes signal divide over taper timing
Here were the main moves in markets as of 4:05 p.m. ET:
S&P 500 (^GSPC): +14.60 (+0.34%) to 4,358.14
Dow (^DJI): +104.42 (+0.30%) to 34,681.79
Nasdaq (^IXIC): +1.42 (+0.01%) to 14,665.06
Crude (CL=F): -$1.40 (-1.91%) to $71.97 a barrel
Gold (GC=F): +$9.70 (+0.54%) to $1,803.90 per ounce
10-year Treasury (^TNX): -4.9 bps to yield 1.3210%
3:40 p.m. ET: FOMC meeting minutes 'not as hawkish as we suspected': Capital Economics
The three major indexes gained after the release of the Federal Open Market Committee's June meeting minutes, with the report showing some hesitancy among some participants to adjust monetary policy before the economy was fully out of the woods with regard to the pandemic.
"The minutes of the Fed's mid-June FOMC meeting were not as hawkish as we suspected, given the shift in the median interest rate projection, which now shows two rate hikes in 2023, and post-meeting comments by various officials," Paul Ashworth, Capital Economics chief U.S. economist, said in a note. "In particular, there seems to be only limited support for beginning to taper the monthly asset purchases anytime soon."
Others offered a similar take.
"The stock market read the Fed meeting minutes and came to the conclusion that the Hear-no, See-no, Speak-no Evil policymakers were not any closer to scaling back their unprecedented monetary stimulus," Chris Rupkey, chief economist at FWDBonds, wrote in an email. "There wasn’t a hint when the announcement on tapering might come besides the comments of some that they were closer to thinking about tapering than they had been."
2:04 p.m. ET: Fed meeting minutes for June show some FOMC members see economy hitting goals 'somewhat earlier than they had projected in March'
In the Federal Reserve's June meeting minutes, Federal Open Market Committee Members suggested the fast-recovering economy might warrant a quicker-than-previously-telegraphed shift to monetary policy.
"In light of the incoming data and the implications for their economic outlooks, a few participants mentioned that they expected the economic conditions set out in the Committee’s forward guidance for the federal funds rate to be met somewhat earlier than they had projected in March," according to the minutes. "Several participants emphasized, however, that uncertainty around the economic outlook was elevated and that it was too early to draw firm conclusions about the paths of the labor market and inflation."
Importantly, however, the minutes noted that, "The Committee's standard of 'substantial further progress' was generally seen as not having yet been met, though participants expected progress to continue."
1:07 p.m. ET: Crude oil extends declines, heading for worst week since March
U.S. West Texas intermediate crude oil futures extended a drop on Wednesday, sinking by another 1.55% to trade near $72 per barrel, adding to Tuesday's losses after a brief surge the highest level since mid-2014.
The commodity is on track to post a weekly decline of 4.9%, which would be its worst week since March. However, prices are still up markedly since the start of the year. Domestic crude oil futures have risen nearly 49% for the year-to-date, largely reflecting the strong pick-up in demand as air travel and other forms of consumer mobility ramped as coronavirus infection rates dipped in the U.S.
1:01 p.m. ET: 'There is still more room to run' for the S&P 500, but expect choppiness in the coming months: BMO Capital Markets
Even with the S&P 500 at all-time highs, stocks likely still have more room to gain this year, albeit with some choppiness expected in the back half of the year, according to Brian Belski, BMO Capital Markets chief investment strategist. He expects the S&P 500 to end 2021 about 3.6% higher at 4,500.
The idea that market fears around inflation have peaked has helped drive stocks higher and catalyzed a rebound in technology and growth stocks after a stretch of underperformance, Belski said.
"This peak rhetoric has also led to some investors contemplating whether current price levels may be 'as good as it gets' for stocks in 2021," he said. However, we believe there is more room to run, especially as companies continue to build on the earnings recovery displayed in recent quarters."
"With that. said, we think investors should be prepared for a 2H that will bring weaker gains than those seen in 1H, along with more frequent bouts of volatility and price choppiness as the recovery matures and investors digest the market implications of an EPS-driven environment," he added.
10:40 a.m. ET: Job openings jumped to record high in May, while layoffs hit record low
Job openings increased in May to a record level as labor supply shortage s continued to weigh on companies across industries.
The Labor Department's monthly Job Openings and Labor Turnover Summary showed U.S. job openings increased to 9.209 million in May. This followed a downwardly revised 9.193 million in April, which was brought down from the 9.286 million previously reported. Consensus economists were looking for May's openings to reach 9.325 million, according to Bloomberg data.
With labor scarcities curtailing the recovery in both manufacturing and services sectors, the frequency of company-driven layoffs fell further in May. The layoffs and discharge rate was at a record low of 0.9%. The voluntary quits rate also declined to 2.5% from April's 2.8%.
9:47 a.m. ET: Bank of America hedge fund, retail clients sold stocks on net last week amid record highs
Bank of America clients sold stock on net last week as the S&P 500 jumped to new record highs and posted a seven-session winning streak, the firm said in its weekly equity client flows update.
Hedge funds comprised the biggest sellers at an aggregate $1.4 billion and sold for a second straight week, Bank of America said. Retail clients, however, sold much more mutedly, with outflows of just $300 million.
Corporate buybacks slowed as companies entered a quiet period ahead of earnings results, the firm added. However, for the year-to-date, buybacks are up 37% compared to the first half of 2020, though they are still down 22% compared to the first half of 2019.
9:30 a.m. ET: Stocks open mixed
Here's where markets were trading after the opening bell:
S&P 500 (^GSPC): +9.37 (+0.22%) to 4,352.91
Dow (^DJI): +22.89 (+0.07%) to 34,600.26
Nasdaq (^IXIC): +62.35 (+0.43%) to 14,725.48
Crude (CL=F): +$0.43 (+0.59%) to $73.80 a barrel
Gold (GC=F): +$8.90 (+0.5%) to $1,803.10 per ounce
10-year Treasury (^TNX): -3.4 bps to yield 1.336%
7:58 a.m. ET: Mortgage applications drop for a back-to-back week, hitting lowest level since early 2020
U.S. mortgage applications declined for a second straight week last week, declining to the lowest level in a year-and-a-half as home price growth and low housing inventories weighed further on purchasing activity.
The Mortgage Bankers Association's weekly index of mortgage application volume fell 1.8% during the week ended July 2. This followed a 6.9% drop during the prior week. By application type, refinances were down by 2% week-on-week and by 8% year-on-year, while purchases fell by 1% over last week and 14% over last year on an unadjusted basis.
“Swift home-price growth across much of the country, driven by insufficient housing supply, is weighing on the purchase market and is pushing average loan amounts higher," Joel Kan, MBA associate vice president of economic and industry forecasting, said in a press statement.
7:28 a.m. ET Wednesday: Stock futures reverse losses to trade higher
Here's where markets were trading ahead of the opening bell Wednesday morning:
S&P 500 futures (ES=F): 4,341.5, +7.5 points (+0.17%)
Dow futures (YM=F): 34,477.00, +17 points (+0.05%)
Nasdaq futures (NQ=F): 14,859.50, +84.00 points (+0.57%)
Crude (CL=F): +$74.58 (+1.65%) to $74.58 a barrel
Gold (GC=F): +$13.60 (+0.76%) to $1,807.80 per ounce
10-year Treasury (^TNX): -3 bps to yield 1.34%
6:12 p.m. ET Tuesday: Stock futures dip
Here's where markets were trading Tuesday evening:
S&P 500 futures (ES=F): 4,328.25, -5.75 points (-0.13%)
Dow futures (YM=F): 34,394.00, -66 points (-0.19%)
Nasdaq futures (NQ=F): 14,761.75, -13.75 points (-0.09%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck